Radical economic policies in Argentina offer lessons – but not a blueprint

Economic reform is usually judged by its numbers: inflation, deficits, growth. Less attention goes to the beliefs and habits that decide whether people will accept those numbers, and for how long.

Based on my research on comparative political economy and strategy in Africa, Asia and Latin America, there's an argument to be made that Argentina under President Javier Milei offers an unusually clear view of that psychology at work as well as useful insights into South Africa's economic path.

Javier Milei took office in December 2023, promising a set of libertarian policies. Libertarian doctrine holds that individual freedom and free markets work best when government is kept to a minimal role, largely limited to protecting property, contracts, personal safety and free market forces.

Milei was true to his promise. His policies included spending cuts, removing a raft of business rules and restrictions, making the peso officially worth less against the dollar, and stopping the central bank from printing new money to cover the government's budget gaps.

Together, these steps were meant to end the habit of overspending and money-printing that fuelled runaway inflation, even though they caused short-term hardship for many households.

Milei delivered Argentina's first fiscal surplus in over a decade and brought monthly inflation down, though at the cost of recession, higher poverty in the early period, and falling real wages and pensions. Later gains included a partial economic rebound and easing of currency controls.

A closer look into Milei's programme reads less as a test of libertarian doctrine than an experiment shaped by Argentina's long history of inflation, default and dependence on the state. That history helped make radical reform possible. Yet by August 2026, more Argentines disapproved of the Milei government than approved. So why might support weaken even as headline indicators improve? Inflation has fallen sharply and the budget is back in surplus.

Central to the Argentine story, and to the role of the state, is how citizens come to rely on – but fail to trust – those at the helm. The concept of “state dependency” captures it. This is a society in which large numbers of people organise their lives around income, jobs and support from the state. Their dependence creates powerful resistance to cuts. Argentina built this over decades.

South Africa and Argentina make a revealing pair. Both are middle-income democracies under fiscal pressure, where frustration with corruption and failing public services sits alongside heavy reliance on the state. But the roots differ.

Libertarianism with Argentine characteristics

In 1943 Colonel Juan Perón introduced social measures to help the country's growing class of urban industrial workers. His set of policies became known as Peronism. It fused union power, protectionism and redistribution.

In 2001 the country suffered an economic collapse. More than half the population was pushed into poverty. Subsidies, price controls and welfare became central to everyday survival. By the end of 2023, roughly 40% of households received a state transfer, and inflation exceeded 200%.

Yet Argentines also learned to distrust the state. The country has defaulted on or restructured its debts at least nine times, and repeated currency collapses wiped out savings. People came to feel losses sharply, to favour spending today over trusting tomorrow, and to meet every stabilisation plan with suspicion. Hoarding dollars and working informally were rational responses.

Decades of crisis produced these defensive habits among citizens. Milei, as a political actor, set out to redirect them.

A society that experiences the status quo as a guaranteed loss is more willing to gamble on radical change. Milei's campaign against la casta, the political class he cast as living off “productive Argentines”, changed the yardstick by which people judged reform.

Milei presented cuts as a moral clean-up targeting insiders and middlemen, even as retrenchment imposed costs on vulnerable households. This helps explain why his libertarianism took the form of a crusade rather than technocratic market reform. This is designed and implemented by technocrats.

The reforms came in phases. A front-loaded fiscal shock, while his mandate was new, turned a deficit into a small primary surplus within a year and cut ministries from 18 to eight. A dedicated deregulation ministry scrapped rent controls and hundreds of rules. Ending central bank financing of the Treasury worked as a shock to expectations. In a front-loaded fiscal shock, government makes its biggest and most painful budget cuts and tax or spending changes at the very start of a reform, rather than spreading them out over time.

Annual inflation has since dropped from a peak of nearly 300% when Milei was voted in to around 33% in 2025.

Greater predictability reduces panic buying and dollar hoarding, making longer-term planning and formal saving more attractive.

It was never pure libertarianism. Free marketeering has not been implemented in local and international trade practices. Universal child allowances and basic pensions survived. Welfare was restructured, with payments made directly to recipients rather than through political brokers. Rule by decree gave way to deals with Congress.

The result is libertarianism with Argentine characteristics.

Real, but provisional, gains

The gains are real but provisional. A post-drought harvest helped, unusually high earlier inflation flattered annual comparisons, and the social costs were substantial. Real public spending fell by roughly 30%, energy and transport subsidies were slashed, and tens of thousands of public jobs were eliminated.

Industrial policy was largely abandoned, and deep cuts to science, education and social protection raise questions around the institutional capacity needed for lasting development.

The central question is whether an early shock can become lasting credibility. Reforms endure only if households, businesses and investors believe they will not be reversed.

As the memory of crisis fades, people judge the government against their wages, jobs and the prosperity they were promised, not against 2023 when Milei was elected. Argentine surveys increasingly point to concern about wages and employment. And because his appeal rested on a moral break with a corrupt elite, corruption allegations reaching the Milei government strike at the story that made hardship bearable.

Falling approval does not mean the experiment has failed. It underlines how hard it is to turn a mandate for disruption into lasting support.

Is Milei's shock therapy transferable?

South Africa's defining trauma is not inflation, which its Reserve Bank has kept in check, but mass unemployment and deeply racialised inequality. More than 26.5 million South Africans receive social grants, which are widely understood as a pillar of post-apartheid redress.

South Africans expect the state to tackle these problems, not retreat from them. Coalition politics, strong unions, active courts, powerful big business and constitutionally protected socio-economic rights make shock therapy far harder. Cuts to social protection would be read through the lens of racial injustice.

Where Milei treats the state as the constraint to be cut back, Operation Vulindlela, run by the South African Presidency and National Treasury since 2020, treats weak coordination in basic infrastructure as a problem to fix.

Credibility can be earned by demonstrating state capability, not only by shrinking the state.

Argentina offers lessons, not a blueprint. Credibility and expectations matter as much as policy design. Confronting patronage works when reform separates the intermediaries who exploit support from the vulnerable people who depend on it. Business and investors can sustain momentum when politics is fragile. And reform needs a story that citizens recognise.

For South Africa, a libertarian route risks eroding the institutions that inclusive growth depends on. The more promising path is a hybrid: a capable developmental state that borrows Argentina's lessons on credibility and patronage while strengthening the state.

Whether Milei's experiment proves a turning point or a temporary rupture remains open. What it already shows is that reform depends less on ideological purity than on institutions, credibility and behavioural context.

This article draws on Argentina's experiment in libertarianism and behavioural political economy: Lessons for South Africa, South Afican Journal of International Affairs (2026), available open access.

Annabel Dennison contributed to this article. She is a Master's candidate in Economics and Psychology at Paris 1 Panthéon-Sorbonne and an intern with the Porter Institute's Africa Hub at the Gordon Institute of Business Science in South Africa.

Lyal White does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

By Lyal White, Director of the Porter Institute Africa Hub, Gordon Institute of Business Science, University of Pretoria